Applying for a mortgage? 3 things you can't have on your bank statement

Applying for a mortgage? 3 things you can't have on your bank statement

Applying for a mortgage can be pretty scary. There's no guarantee that at the end of the mortgage application process, you'll walk away with the home loan you'll need to buy your property.

Post-April 2014 the Mortgage Market Review (MMR) measures were rolled out and the process became even more stringent. Nowadays you have to give in-depth information from your bank statement about what you spend each month including on:

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If you are applying for a mortgage these are 3 things you can't have on your bank statement:

1. Online Gambling

The online gambling market in the UK was worth £2 billion in 2012 and since then, online gambling platforms have positively mushroomed in number, user base and funds handled. The appetite for this gambling fix is clear, however surely the odd flutter can’t hurt your mortgage application?

Mortgage lenders process thousands of mortgage applications every month and they’ll want to lend money to the lowest risk applicants first. Gamblers by nature are risk takers, betting that they’ll beat the odds. If you have regular payments leaving your bank account going to online gambling websites, then this can be picked up by mortgage lenders when they review your bank statement.

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2. Unauthorised (or even authorised) Overdraft

Most people have an overdraft facility linked to their bank account which can range from £100 up to £2,000, depending on your income. If your bank statement shows that you regularly use overdraft then this indicates to a mortgage lender that you need the facility in order to get through all of your payments each month.

As an overdraft isn't a formal loan agreement and can be called upon by the bank at any time (meaning you'd have to repay the money), mortgage lenders will be concerned if you constantly live inside of your overdraft facility; either because you aren't managing your spending or you simply cannot afford your outgoings (what you earn doesn't cover what you spend).

An unauthorised overdraft means you haven’t agreed a formal overdraft facility with your bank in advance and have withdrawn more money than you have in your account, or you have taken out more than your authorised overdraft limit. You may think that you simply have to pay your bank or building society's charge, however to a mortgage lender it is showing that you run a high risk of not being able to pay your mortgage repayments due to over spending.

Remember, regular use of any overdraft demonstrates a lack of control over your finances and places you at a higher risk compared to other mortgage applicants.

It is good practice to only use your overdraft in emergencies and to clear it each month. It is bad practice, on the other hand, to use your full overdraft as your ‘zero balance’.

3. Pay Day Loans

The new pay day loans have become a regular ‘get out of jail’ for many people during months where they run out of cash before they get paid. There are no official figures on how many people use this sort of borrowing, but Consumer Focus estimated that 1.2 million people took out 4.1 million loans in 2009.

Pay day loans are viewed as short term loans where borrowers get fast decisions on smaller loans with huge interest APRs, some more than4,000%. What many people don’t know is that pay day loans leave a mark on your credit file and a massive red flag to mortgage lenders.

If you get a pay day loan a mortgage lender will assume you to be a higher risk as you require the credit facility of these loan providers. In fact, after speaking to some mortgage advisers, we were informed that some mortgage applications could be turned down purely based on this.

If you are looking to apply for a mortgage and have any of the 3 items mentioned above on your bank statement, our mortgage advisors can help you best proceed with your application - please call 0333 344 3234.

Time is the greatest healer for bad credit

Getting a mortgage is a serious process and few high street mortgage lenders want to take on applicants with high risk, cash hungry habits. However don’t give up if you are looking to get a mortgage if you have any of the above three payments leaving your bank account. The best advice from most mortgage brokers is to stop using these financing facilities and don’t apply for a mortgage until at least 6 months has elapsed since you last used them. You should also stay on top of your credit report on a monthly basis.

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